DVC show financing

disneyland_is_magic

DIS Veteran
Joined
Aug 16, 2016
Listening right now and I think this is too much. It’s one thing to say we shouldn’t blanket say people shouldn’t finance DVC and take on debt. Of course, it’s none of our business to judge other people’s choices but some of these comparisons of justification are too much.

Corey Fiasconarios just said saying you shouldn’t finance DVC is like the same as saying if you can’t afford to pay cash for a home, you should only rent. What!!! That’s apple and oranges, a home is a stable investment, a mortgage can be cheaper then rent. You also HAVE to live somewhere so trying to build equity with that money makes sense for many people. Buying a home is also about establishing stability for your kids, so they can have roots and long term friends and long term schools. I was disappointed no one at the table didn’t speak up to that.

They also mentioned Sean financed most of his recent Aulani purchase he bought straight from Disney. I did not understand that at all, he bought direct at $188 a pt, if he had an emergency the current resale is 100 a point, would it not be an immediate and significant loss? Is it right for Sean with a Dis career? Sure! But I don’t think you should be advocating that to your listener base. If you are financing it seems like resale makes more sense with less risk.

Is financing a consideration worth looking at on an individual basis? Sure! It’s also possible you may have the cash, but elect not to tie it up. But I think they are going way too far the other way on this show. This advice seems unwise.
 
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  • sethschroeder

    DIS Veteran
    Joined
    Feb 24, 2013
    Everyone is entitled to spend their money the way they want to.

    If your decision is solely based on one show, you have bigger issues than financing DVC through Disney.
    Two points, they are not spending their own money when financing they are spending others money actually.

    I personally have no issue financing but I would not suggest it for others since I have zero clue about their background or financial status.


    Corey just said saying you shouldn’t finance DVC is like the same as saying if you can’t afford to pay cash for a home, you should only rent. What!!! That’s apple and oranges, a home is a stable investment, a mortgage can be cheaper then rent.
    They also outlined luxury cars when in reality many of those vehicles are not going to loose massive value or be so subject to a 3rd party. If Disney raises ticket prices 10% every 6 months, changes point charts, ect that will directly change your resale value.

    This completely ignores you OWN a home/car and you are RENTING the points from Disney with an expiration date at which you have $0 in value left.

    I just viewed this specific show more as an "infomercial" as opposed to the informative shows they typically put out.
     

    jbehr12

    Mouseketeer
    Joined
    Aug 18, 2018
    Everyone is entitled to spend their money the way they want to.

    If your decision is solely based on one show, you have bigger issues than financing DVC through Disney.
    Well that was unnecessarily rude and defensive. Telling someone they “have issues” because they point out that the financing advice is unwise for some, which it is, is a little much.
     

    Pyotr

    Mouseketeer
    Joined
    Jun 17, 2018
    Well that was unnecessarily rude and defensive. Telling someone they “have issues” because they point out that the financing advice is unwise for some, which it is, is a little much.
    I was not telling the OP that they had issues.

    If someone is going to make a major decision, like financing an expensive timeshare, they should do extensive research from multiple sources. Not base your decision solely on one podcast.

    A timeshare is like an expensive car. The moment you own it, the value drops.

    DVC is not an investment. It’s a prepaid vacation.
     
  • disneyland_is_magic

    DIS Veteran
    Joined
    Aug 16, 2016
    Well if that’s the case then you and I agree. I wanted to discuss the validity of their arguments or hash out risks they glossed over. I don't think they even really discussed how far out it would push your break even point which is another consideration.
    I don’t think pre-purchasing vacations it’s anything remotely like the decision to buy a home. Your home does not have an expiration date. That entire argument was so completely faulty.

    I do wish I had worded my post a bit differently to make it clear I think it's mean and self-righteous to condemn people for financing DVC. But I also think Pete skewed too far to the other side without some considerations of risks.
     
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    Chrisizzle

    Mouseketeer
    Joined
    Mar 9, 2019
    Yeah, this episode was sketchy.

    They say with a straight face you can finance just 30 points at 15% interest... and don’t forget the lender fees.

    It’s like telling someone a payday loan is not a bad idea. Just borrow $200 for two weeks for only $30.

    And this is after an entire season of Pete Werner bragging about all the contracts he’s spontaneously bought with cash.

    I remember a few episodes ago on the Disney World show, Craig accidentally called Pete out for not realizing he was well off. This may be Pete swinging the other way to show how anyone can “afford” DVC.
     

    Chrisizzle

    Mouseketeer
    Joined
    Mar 9, 2019
    I wouldn’t take Corey Fiasconarios opinions on investment beyond face value.
    This is a whole other topic, but how did Fiasco go from being no where to being on EVERY show.

    And his opinions always start with “I haven’t done the thing you are talking about but I’ll repeat what Pete said.”

    Oh wait...now I see why Pete put him on every show. 😜
     

    TonyaG83

    Mouseketeer
    Joined
    Jan 28, 2017
    They also outlined luxury cars when in reality many of those vehicles are not going to loose massive value or be so subject to a 3rd party. If Disney raises ticket prices 10% every 6 months, changes point charts, ect that will directly change your resale value.

    This completely ignores you OWN a home/car and you are RENTING the points from Disney with an expiration date at which you have $0 in value left.

    I just viewed this specific show more as an "infomercial" as opposed to the informative shows they typically put out.
    I disagree. All cars, luxury or otherwise, automatically drop 30% in value once you drive them off the lot. They are worth less than the contract you just signed to finance them. IF you choose to finance a BMV over a Toyota, that’s the reality of the situation. And associated fees do fluctuate. Gas, insurance, maintenance, etc change regularly. My insurance premium went up $1000 this year because OTHER people in my postal code were getting into more accidents.

    People finance for different reasons. I did it for all of my dvc purchases because I found contracts before I found a good exchange rate (CAD to USD) I could hedge. I also bought DVC before a home because I live in a metropolitan area where a starter home is minimum 1 million and cost of living is in line with that price. I don’t feel comfortable extending myself for that much over a 20-30 year period via a mortgage and I’d never be able to pay cash. But a couple thousand for a DVC loan? Much less scary and justifiable since I’d be going to Disney 4 weeks a year anyways and would end up charging everything to my band (credit card) and paying it off in stages (since Staying at a deluxe resort for 2 weeks adds up, sometimes more than an initial dvc buy in).

    Most people have credit cards and depending on your tier, those come with service fees and interest. Most cards that provide great rewards, have fees and interest to match. Some have a grace period and some start accumulating interest as soon as you charge the purchase. That doesn’t stop people who have them from using them. You can either make the minimum payment every month or pay them off. Just like with most of these financing loans.

    I agree with the point that no one knows another person’s financial situation or WHY they choose to finance. I do think it can make sense and we shouldn’t judge those who do it.
     
  • DisneyRobbie

    Earning My Ears
    Joined
    Oct 7, 2019
    This show is so entertaining. Even though I disagree with the idea that financing is a great idea. I'm a Dave Ramsey FPU graduate - this is baby step 5-6-7 stuff. If you have enough money DVC is probably a good idea but it's like their recommendations on buying a new car - you shouldn't do it until you have secured your finances, pay off all your debt, have an emergency fund and a 1 million dollar net worth. It's not just about the percentage interest rate - any money tied up in financing is money you are not contributing to your retirement.
     

    sethschroeder

    DIS Veteran
    Joined
    Feb 24, 2013
    My insurance premium went up $1000 this year because OTHER people in my postal code were getting into more accidents.
    Find new insurance is my tip and you also can't do that with DVC. If people start ruining rooms you can't get in a different group of renters that are nicer to the facilities.

    All cars, luxury or otherwise, automatically drop 30% in value once you drive them off the lot.
    If buying new which the DVC show is supported by and more directional towards resale. If talking about new then both lose a portion off the top upon purchase.

    Gas, insurance, maintenance, etc change regularly.
    Change based on the economy and real world markets. Gas being more (or less don't see that with Disney) is the same regardless of your vehicle. Maintenance is going to fluctuate but primarily off the standard wage of mechanics. The cost of Disney maintenance fees, tickets, food, ect are directly correlated to how Disney decides to change things.

    If you can't see how DVC has potential for more volatility I am not sure what to say.

    I am not telling people not to finance but you can't use examples that are not exactly related. What possibly would be closer is saying you would lease a car.
     

    CanadaDisney05

    DIS Veteran
    Joined
    Mar 20, 2017
    I agree that this whole episode didn't sit well with me. I truly do believe that the key word in the term "Personal Finance" is "Personal". There is no right way, and no wrong way to do things. An adult making a large financial decision SHOULD have a good understanding of the pros/cons that come along with it, and how it affects them personally. However, we all know that the majority of people make emotional decisions without truly understanding the consequences. This is where I believe things can get predatory.

    I felt that this episode was basically used as a way to drive sales to the DVC Store. Instead of dissecting the other side of the argument, the response was basically "shutup, your stupid!". Where it really went off the rails for me was when Pete mentioned that it should be normal for people to use a credit card to finance their routine vacations (which helps his travel agency business). People who understand how credit cards work use them without paying a nickel of interest.

    I preface this with the fact that I personally work in Finance. I am not opposed to financing. I actually used a form of financing (not the traditional method) myself for my DVC. In fact, financing isn't even the correct term. In reality everyone is using some sort of financing, even those who pay with cash. There are two types of financing, Debt or Equity, and everyone is using one of those. Each type of financing comes with it's own "cost of capital". When you use debt, your cost of capital is the interest rate. When you use cash, your cost of capital is the "opportunity cost" of not investing those funds. For example, if I pay 30K cash for my DVC, and I know I could invest in the markets and get a return of 6% over the long term, using cash is costing me the same amount that a 6% interest rate loan would have costed. Using cash is not "free", or necessarily even cheaper than debt.

    When deciding how to finance any major financial investment (DVC included), there are several factors to consider.

    1) Cost of capital: which method provides the lowest cost of capital
    2) Liquidity: if there is a major event in your life which requires access to cash, which method provides the easiest access. If your money is invested in the market, you can pull the money out easily. You may take a loss, but atleast you have access. If your cash is tied up in DVC, and you don't have access to other cash, then you could find yourself in trouble.
    3) Timeline: Generally, to give yourself the best chance investing, you need to keep your funds invested for the long term. If your in, or close to retirement, you probably are not investing in risky enough assets where the return would be much higher than the interest rate on a loan.

    In general, if your financing through Monera, Disney, or any of the traditional DVC loan companies, your interest rate is going to be a lot higher than the cost of capital on cash. This is even worst on a credit card. This is why you see so many people on here suggesting to not use financing. However, if you finance through a refinanced mortgage or a Home Equity Line of Credit, it is very likely that your interest rate is much lower than the cost of capital of cash. For example, I recently refinanced my home, got an interest rate of 2.5%, and used the equity to pay for DVC. This allowed me to leave my investments in place which I expect a long term rate of return of 5 to 7%.

    If you simply don't have the cash available, you really only have two options. Debt, or don't purchase. If you really don't have the cash available to make the purchase, then you really need to be careful on this purchase. What if you lose your job? Major medical issue? Or any one of a million different things that require you to cut your vacation budget dramatically? While I agree everyone's personal finance is there own decision, I think it is really important to inform those in this situation (basically living paycheque to paycheque) of the potential consequences of the purchase.

    This is why people say DVC is a luxury item and shouldn't be financed. It's not that it shouldn't ever be financed. But in general, those who are financing through the traditional timeshare loan companies are financing because they can't actually afford it. Its the same technique the car sales person uses. Notice, they never ask how much you want to spend on the car. They always ask what do you want your monthly payment to look like.

    Edit: I did want to clarify that I don't believe the group at The DIS are in fact predatory. I just believe they are a group of travel agents, with a financial interest in you spending money on Disney Vacations (through referrels/advertising with the DVC Store or simply booking vacations through them). They are not a financial advisors, and they may have mistakenly forgot to mention all the negatives/risks of financing, while only discussing the pros.
     
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    CanadaDisney05

    DIS Veteran
    Joined
    Mar 20, 2017
    you shouldn't do it until you have secured your finances, pay off all your debt, have an emergency fund and a 1 million dollar net worth. It's not just about the percentage interest rate - any money tied up in financing is money you are not contributing to your retirement.
    I agree, and disagree. I agree that you shouldn't buy DVC until you've secured your finances, and paid off your "high interest debt" (credit cards, unsecured lines of credit, etc...).

    I disagree that you need to have low interest debt paid off, or have a 1 million dollar net worth (that's an arbitrary number).

    If you have an adequate emergency fund, a long term retirement strategy (in which DVC ownership doesn't negatively affect), and can afford it, there is no reason to not buy DVC, or the fancy car.
     

    Pyotr

    Mouseketeer
    Joined
    Jun 17, 2018
    Well if that’s the case then you and I agree. I wanted to discuss the validity of their arguments or hash out risks they glossed over. I don't think they even really discussed how far out it would push your break even point which is another consideration.
    I don’t think pre-purchasing vacations it’s anything remotely like the decision to buy a home. Your home does not have an expiration date. That entire argument was so completely faulty.

    I do wish I had worded my post a bit differently to make it clear I think it's mean and self-righteous to condemn people for financing DVC. But I also think Pete skewed too far to the other side without some considerations of risks.
    I have DVC and I financed it. For me personally, it made sense to finance it then pay it off in a short amount of time. Even though I have the cash to pay for it, it would rather not tap into my cash reserves. I didn’t want to cash out investments either.
     

    ray3127

    Life goal = Quarterly vacation
    Joined
    Aug 2, 2018
    In fact, financing isn't even the correct term. In reality everyone is using some sort of financing, even those who pay with cash. There are two types of financing, Debt or Equity, and everyone is using one of those. Each type of financing comes with it's own "cost of capital". When you use debt, your cost of capital is the interest rate. When you use cash, your cost of capital is the "opportunity cost" of not investing those funds.
    Thank you for this excellent post, especially the quoted part above. I've had thoughts surrounding this idea, but was not able to articulate it as well as you did.

    For example, when the anti-finance crowd says "you should only pay cash", I wonder if they are okay with carrying other debt. Let's say I have $30k saved up for DVC, but I still owe $150,000 on my mortgage (let's say it's 4%). If I buy DVC with the cash, I'm paying the opportunity cost (through more interest) by not paying down the house. Again, you succinctly covered this, and many more situations, with your post. Not assigning a cost to equity financing is a routine mistake I read on the boards.
     

    b2k1121

    Mouseketeer
    Joined
    Mar 12, 2015
    I was not telling the OP that they had issues.

    If someone is going to make a major decision, like financing an expensive timeshare, they should do extensive research from multiple sources. Not base your decision solely on one podcast.

    A timeshare is like an expensive car. The moment you own it, the value drops.

    DVC is not an investment. It’s a prepaid vacation.
    DVC is a little different than a typical timeshare though. The contract I bought 3 years ago has increased in value about 40%. Not saying anyone should buy expecting anything like that, but I could sell it now for quite a bit more than I paid. I would not call it an investment, but it is a much safer purchase than other timeshares which are essentially worth nothing if you want to unload them. The only reason I pulled the trigger on the purchase was because I knew I could sell if I needed to.
     

    Fred M

    DIS Dad #860
    Joined
    Jul 1, 2019
    I get that people are passionate about their personal decision on whether to finance DVC or not, but I don't know why people insist that everyone else has to do it their way. If you want to save money for 7 years and then pay cash for DVC, then cool! If you want to finance it and you can afford the financing, great!

    People do smart and stupid things with their money all the time. Who are the rest of us to judge?
     



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